Former Opposition leader Malcolm Turnbull has announced he will no longer be retiring from politics and will contest this year's federal election.

Mr Turnbull announced on his website in early April that he would quit federal politics at the next election, but backed down from that decision today after being urged by several Coalition colleagues to reconsider the decision.

He told media in Sydney this morning he had withdrawn his resignation and will be contesting his Sydney seat of Wentworth at this year's election.

He says the Rudd Government is one of the worst Australia has ever seen and that its "gutless" stance on climate change influenced his decision to stay on.

"We have a government that cannot manage the economy, that cannot manage finances, and as we've seen in the last week, a prime minister that has no courage at all," he said.

"The Prime Minister's abandonment of the central element in his climate change policy, measures which he said were necessary to combat the greatest moral challenge of our times, constitutes an extraordinary act of political cowardice.

"Over the last two terms of Parliament, whether as a backbencher, a Minister or as Leader of the Opposition, I have always stood up for my political convictions. And I will continue to do so."

Mr Turnbull said he had been "overwhelmed" by support from residents in Wentworth and members of the Liberal Party urging him to run again.

Mr Turnbull says his decision to stay in politics will not cause a rift between him and Tony Abbott over climate change policy.

Mr Turnbull says while he supports an emissions trading scheme (ETS), he also supports Tony Abbott as leader.

"People know what I stand for. But the party has a policy... for climate change. The Labor Party has nothing," he said.

"We are only months away from a federal election and we have a federal government that has no policy on what its leader describes as the greatest moral challenge of our times."

"The Liberal Party has had four leaders in a very short period of time and I would expect that this just reflects further instability yet to come."

Mr Turnbull's backflip is seen by some of his colleagues as a big risk, but others welcomed his change of mind, saying the party needed his talents in parliament.

His colleagues say Mr Turnbull would hold Wentworth if he runs again, after fearing the seat was at risk of being lost because of his decision to retire.

Colleagues also say circumstances have changed since Mr Turnbull decided to retire. In particular, the Federal Government's decision to shelve its plans for an ETS makes Mr Turnbull's differences with the Liberal position on the issue less of a problem.

Revolt rebound

Mr Turnbull was replaced by Mr Abbott as Opposition Leader in December last year after Liberal MPs revolted against Mr Turnbull's stance on emissions trading.

Support for Mr Turnbull's leadership began to fracture in the second half of last year as resistance grew to his support for an ETS.

Some in the Liberal partyroom complained of Mr Turnbull's leadership style and he was criticised for not consulting enough with others over the Coalition's climate change policy.

Finally in December, after only 11 months in the top job, he lost the leadership by just one vote to the more conservative and hardline Mr Abbott following the frontbench revolt.

When he announced his decision to retire in April, Mr Turnbull did not resist taking a swipe at Mr Abbott for ditching Liberal Party support for an ETS.

"I regret that another important reform begun during that time [during John Howard's leadership], the establishment of an emissions trading scheme, is no longer Liberal Party policy," he said.

Mr Turnbull had indicated he was ready to return to the Opposition frontbench after the resignation of Senator Nick Minchin in March.

Mr Abbott rebuffed his offer, but said there would be a frontbench space for him after the next election and after Parliament had dealt with the ETS legislation.

Mr Turnbull, a former barrister and merchant banker, was elected to Parliament for the blue ribbon seat of Wentworth in 2004 and was promoted to the frontbench by John Howard in 2006 as his parliamentary secretary.

In January 2007 he became environment minister.

After the Coalition's 2007 election loss Mr Turnbull became treasury spokesman under then-leader Brendan Nelson, but he did not hide his leadership ambitions and speculation of a challenge was never far away.

In September 2008 as Dr Nelson was floundering, Mr Turnbull took hold of the leadership.

But he fared little better in the polls and went backwards in the wake of the OzCar scandal that saw him take a hit over his political judgment.